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Posted on August 17, 2010
The Alberta Securities Commission (ASC) has recently published its 2009 Oil & Gas Review Report dated July 2010. Designed to help issuers deal with oil and gas disclosure, the report also sets out the ASC’s expectations relating to mandated disclosure including information on the latest developments under National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities and key disclosure issues. Topics of discussion include general guidance on NI 51-101 (in areas such as owning a stake in another company, unique features of international properties, combining reserve estimates and errors in published disclosure), analysis of technical revisions of reserves, international policy developments and upcoming amendments to NI 51-101.
Posted on July 22, 2010
Yesterday, the Securities and Exchange Commission (SEC) approved changes to Form ADV, the principal disclosure document that registered investment advisers are required to provide to clients. According to SEC Chairman Mary Schapiro, the current form's check-the-box formal "frequently does not correspond well to an adviser's business." As such, the changes are intended to improve the information available to clients regarding those providing them with investment advice. To that end, the format of the brochure will be updated to including narrative in plain English, the content will be expanded to include topics such as fees and compensation, an adviser's disciplinary information and brokerage practices and advisers will be required to deliver brochure supplements that contain "résumé-like disclosure" regarding such things as educational background and business experience. Advisers will also be required to electronically file brochures, which will be available to the public on the SEC's website.
The amendments will be effective 60 days after publication in the Federal Register and the SEC expects that investment advisers will begin distributing and posting new brochures in the first quarter of 2011.
Posted on July 22, 2010
The Securities and Exchange Commission (SEC) yesterday announced proposals intended to improve the regulation of mutual fund distribution fees and provide enhanced disclosure for investors. Distribution fees, also known as 12b-1 fees, are fees paid by the fund out of its assets to cover distribution costs and shareholder service expenses. The proposals would limit fund sales charges, improve the transparency of fees by requiring funds to identify and more clearly disclose distribution fees, encourage retail price competition and revise fund director oversight duties. The proposals will be open to a 90-day comment period after publication in the Federal Register.
Posted on July 9, 2010
The Canadian Securities Administrators today released Staff Notice 51-332 - Continuous Disclosure Review Program Activities for the Fiscal Year Ended March 31, 2010. As the title of the notice implies, the report summarizes the results of the CSA's continuous disclosure review program of issuers (other than investment funds) for fiscal 2010.
During fiscal 2010, the CSA completed 527 full reviews and 824 issue-oriented reviews of issuers, selected generally from those at a higher risk of non-compliance. Ultimately, the CSA required 72% of issuers reviewed to take action to improve disclosure. Common deficiencies identified in the full reviews related to the disclosure of accounting policies and measurement issues, the generic nature of disclosure in the MD&A and the improper use of oil and gas terminology. Review outcomes included (i) requiring an issuer to make certain changes or enhancements in the next filing; (ii) educating the issuer with respect to disclosure enhancements; (iii) requiring the issuer to refile certain documents; and (iv) adding the issuer to the CSA's default lists, issuing a cease trade order or referring the issuer to enforcement.
For fiscal 2011, the CSA stated that issue-oriented reviews will focus on IFRS transition disclosure, material contracts, corporate governance and follow-up review of certification.
Posted on June 24, 2010
Staff of the Canadian Securities Administrators (CSA) recently published a notice providing an update on the point of sale disclosure project for mutual funds. The update follows the CSA's consideration of comments to proposed amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure, which were published in June 2009. Despite some compliance concerns by commentators, the CSA made clear in the notice that they remain committed to implementing point of sale disclosure for mutual funds.
The CSA intend to proceed with a staged implementation of the project, which according to the notice, will provide the CSA "the opportunity to continue to consult with stakeholders and to consider the applicability of the point of sale regime for mutual funds to other types of publicly offered investment funds". Specifically, the CSA intend to proceed by first finalizing the requirements respecting the preparation and filing of a "Fund Facts" document, which would be posted on the mutual fund's or manager's website and provided to an investor upon request. The CSA expect to publish such requirements by December 2010, with an effective date in early 2011. Second, the CSA intend to publish for comment, in mid-2011, a proposal to allow delivery of the Fund Facts document to satisfy prospectus requirements to deliver a prospectus within two days of buying a mutual fund. While the CSA work on the proposal, they plan to consider applications for exemptive relief to use Fund Facts to satisfy current prospectus requirements. Finally, the CSA intend to publish requirements for point of sale delivery for mutual funds and possibly for other types of publicly offered investment funds once it has completed the review of relevant issues.
CSA Staff Notice 81-319 Status Report on the Implementation of Point of Sale Disclosure for Mutual Funds
Posted on June 17, 2010
The Hennick Centre for Business and Law and Jantzi-Sustainalytics released a report this week recommending that OSC Staff issue guidance clarifying the existing social disclosure and corporate social responsibility disclosure obligations in MD&A and AIF forms, particularly with respect to materiality. The report was prepared in response to a resolution passed by the Ontario Legislature calling on the OSC to conduct a consultation on corporate social responsibility and environmental, social and governance reporting standards.
Ultimately, the report recommended that, rather than adopting new rules, "the way forward should entail promotion of best practices within the existing regulatory framework". The OSC was also encouraged to "support a shift in the direction of more standardized metrics and reporting" and undertake periodic reviews to actively monitor disclosure trends and related internal controls.
For more on the report, see Janet McFarland's article from Tuesday's Globe and Mail.
Posted on June 14, 2010
On June 11, the Canadian Securities Administrators (CSA) published revised guidance relating to the reporting of certain derivative-based transactions, including equity monetizations, intended to "assist reporting insiders who have entered into such transactions and to promote consistency in filings." The notice provides examples of arrangements and transactions involving derivatives along with guidance as to how to report these arrangements and transactions on SEDI. A revised notice was also published by the CSA setting out questions and answers intended to assist users in filing information on SEDI. The Q&As are set out based on the steps in the SEDI filing process and the type of SEDI filer.
You may also want to see our previous post of April 21 regarding the newly-implemented insider reporting requirements and our post of April 29 regarding the CSA's FAQ on the new requirements.
Guidance: CSA Staff Notice 55-312 Insider Reporting Guidelines for Certain Derivative Transactions (Equity Monetization) (Revised)
Q&A: CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and the System for Electronic Disclosure by Insiders (SEDI)
Posted on May 7, 2010
Proposed amendments to NI 43-101 Standards of Disclosure for Mineral Projects
Raymond McDougall
Following a substantive review of National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101), the Canadian Securities Administrators (the CSA) have issued for comment an amended draft of NI 43-101 (Amended NI 43-101). Amended NI 43-101 does not alter any of the fundamental principles of NI 43-101, but it does contain a significant number of changes and many improvements.
Overview
In the spring of 2009, securities commissions in British Columbia, Ontario and Quebec conducted consultations with mining-industry participants, including issuers, advisors and professionals, as part of an ongoing review to improve and update NI 43-101. Through this process, and with additional input obtained by the commissions in Alberta and Saskatchewan, the CSA collected and considered various feedback and suggestions. Amended NI 43-101 represents the outcome of this process, together with the views and experiences of the CSA since the adoption of NI 43-101. The result includes many improvements that streamline and reduce certain specific regulatory burdens under NI 43-101 in a variety of contexts, including corporate finance and M&A transactions, particularly those involving parties from international jurisdictions. At the same time, Amended NI 43-101 introduces some new requirements, particularly by making changes to the technical report requirements.
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Posted on April 30, 2010
The Investment Industry Regulatory Organization of Canada (IIROC) published a notice on April 28 providing guidance related to UMIR obligations to mark orders to purchase or sell securities for insiders or significant shareholders. The notice anticipates the upcoming implementation on April 30 of the new insider reporting regime and provides answers to frequently asked questions regarding the UMIR obligations. Questions considered include, among others: (i) whether every order for an insider of a particular security must contain a marker; (ii) when a participant can rely on "know your client" information to establish whether a marker is required; and (iii) whether a marked order can be bundled together with orders for those that are not reporting insiders.
Posted on April 29, 2010
The Canadian Securities Administrators (CSA) yesterday published a staff notice addressing frequently asked questions regarding the new insider reporting regime under National Instrument 55-104 Insider Reporting Requirements and Exemptions. The notice contains examples of arrangements and transactions and corresponding guidance regarding the reporting of such arrangements and transactions. Specifically, the questions addressed include those with respect to (i) whether existing insiders have to file a new initial report; (ii) whether existing insiders who are not reporting insiders under NI 55-104 have to file anything to show their change in reporting status; (iii) exemptions for automatic securities purchase plans; and (iv) grants of related financial instruments.
The CSA also stated that it intends to shortly publish general guidance regarding: (i) reporting for certain derivative transactions and (ii) questions and answers on insider reporting and SEDI.
Posted on April 23, 2010
The Canadian Securities Administrators (CSA) today published proposed changes to National Instrument 43-101 Standards of Disclosure for Mineral Projects, its companion policy and Form 43-101F1 Technical Report, as well as related consequential amendments. The proposals are intended mainly to represent more effective and efficient disclosure and to reduce compliance costs. The proposed changes include eliminating or reducing certain requirements, providing more flexibility with respect to requirements applicable to issuers and qualified persons in certain areas, providing more flexibility to accept new foreign professional associations, professional designations, and reporting codes as they arise or evolve, reflecting changes that have occurred in the mining industry, and clarifying or correcting certain areas that did not have the intended regulatory effect.
Comments on the proposals are being accepted until July 23, 2010.
Posted on April 21, 2010
Simon Romano and Ramandeep Grewal
While a narrower group of “insiders” will be required to report, the rules also include specific reporting obligations in respect of management companies, income trust issuers and those holding convertible securities.
Effective April 30, 2010, the Canadian Securities Administrators (CSA) will be implementing a new regime for insider reporting under National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104 or the Instrument). NI 55-104 will principally harmonize all requirements relating to insider reporting and most insider reporting exemptions across all provinces and territories. Generally, NI 55-104 will reduce the scope of persons required to file insider reports and expand the nature of interests that must be reported. As discussed in detail below, some of the key features of NI 55-104 include:
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Posted on April 19, 2010
On April 9, the Canadian Securities Administrators (CSA) announced amendments to Form 81-101F2 Contents of Annual Information Form and Form 41-101F2 Information Required in an Investment Fund Prospectus. The amendments were originally published for comment on October 9, 2009 and are intended to ensure consistency between the disclosure requirements for advisers under National Instrument 23-102 Use of Client Brokerage Commissions relating to client brokerage commissions and similar disclosure prescribed for investment funds. This is proposed to be achieved by changing the existing disclosure required in Form 81-101F2 and by adding a new disclosure item to Form 41-101F2 relating to brokerage arrangements involving client brokerage commissions in order to provide investors with relevant qualitative information regarding goods and services other than order execution obtained in connection with client brokerage commissions. Pending approval in Ontario by the Minister of Finance, the amendments are expected to come into force on June 30, 2010.
Posted on April 9, 2010
On April 7, the U.S. Securities and Exchange Commission (SEC) announced proposals to revise the rules respecting asset-backed securities in order to "better protect investors in the securitization market." Specifically, the proposals would make changes to the offering process, disclosure and reporting for asset-backed securities (ABS). The changes are described by the SEC as being comprehensive and imposing new burdens in order to "provide investors with timely and sufficient information...reduce the likelihood of undue reliance on credit ratings, and help restore investor confidence in the representations and warranties regarding the assets." Comments on the proposals are being accepted by the SEC for 90 days after publication of the proposals in the Federal Register.
Meanwhile, the International Organization of Securities Commissions (IOSCO) released a report yesterday entitled "Disclosure Principles for Public Offerings and Listings of Asset Backed Securities". The report is intended to "provide guidance to securities regulators who are developing or reviewing their regulatory disclosure regimes for public offerings and listings of asset-backed securities (ABS)." Specifically, the report outlines the information that should be included in any offer or listing document for a publicly offered or listed ABS.
Posted on April 9, 2010
The Canadian Securities Administrators (CSA) today released proposed amendments to National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer, its companion policy, forms and related consequential amendments. The amendments are intended to improve the beneficial owner communication procedures by, among other things, incorporating notice-and-access provisions for proxy-related materials for meetings that are not special meetings, simplifying the beneficial owner proxy appointment process and enhancing disclosure regarding the beneficial owner voting process.
In particular, the notice-and-access provisions would allow reporting issuers to post information circulars on a website (non-SEDAR) and send a notice to beneficial owners informing them that the proxy-related materials have been posted. An explanation of how to access the material and a voting instruction form would be included with the notice. The CSA also highlighted the differences between its proposals and the U.S. model for notice-and-access. Despite the differences, however, SEC issuers would be permitted to use the U.S. process to comply with CSA requirements.
The CSA are accepting comments on its proposals until August 31, 2010 and have specifically invited comments on a number of questions, primarily relating to notice-and-access.
Posted on April 6, 2010
The U.S. Securities and Exchange Commission published a staff legal bulletin on March 15 providing the views of its Division of Corporation Finance respecting the circumstances under which issuers may suspend their reporting obligations under section 15(d) of the Securities Exchange Act of 1934 by relying on Rule 12h-3. Citing the routine nature of no-action requests by issuers, the large body of no-action precedent and the guidance in the bulletin, the Division is of the view that, on a going-forward basis, issuers that fit within the situations identified by the bulletin and that satisfy the relevant conditions do not need a no-action response before filing the applicable form to suspend its section 15(d) reporting obligations.
Posted on March 26, 2010
On March 10, 2010, the Investment Industry Regulatory Organization of Canada (IIROC) published a guidance note outlining its expectations with respect to Dealer Members reporting changes to their business models. According to IIROC, it is "essential" that it be made aware of "significant changes" to a member's business model as such reporting will enable more efficient and effective regulatory supervision. While a "significant change" depends on the circumstances of each case, the note provides some examples of changes that are expected to be reported. Further, IIROC expects the notifications to be thorough and detailed so as to allow it to "fully understand and assess" the changes to the business model.
Posted on March 24, 2010
Earlier today, the Canadian Securities Administrators (CSA) published proposed amendments to National Instrument 41-101 General Prospectus Requirements intended to provide investors with "more meaningful and effective prospectus disclosure" with respect to scholarship plans. A new disclosure form tailored to scholarship plans was also proposed, which would organize the format and content of disclosure in order to make the disclosure "more understandable, accessible and readable." The proposals are open for a 90-day comment period.
Posted on February 26, 2010
The SEC issued a statement on Wednesday outlining its position with respect to global accounting standards. Specifically, the SEC stated that it supports "the objective of financial reporting in the global markets pursuant to a single set of high-quality globally accepted accounting standards." It recognizes, however, that incorporating IFRS into the U.S. financial reporting environment would be a large task and recognizes the need for deliberation as well as a sufficient transition time to prepare for such a change.
Thus, the SEC directed its staff to develop and execute a work plan to enhance the SEC's understanding and assist it in making a decision in 2011 regarding the incorporation of IFRS into the financial reporting system for U.S. issuers. Specifically, the work plan sets out the following areas of concern: (i) sufficient development and application of IFRS for the U.S. domestic reporting system; (ii) the independence of standard setting for the benefit of investors; (iii) investor understanding and education regarding IFRS; (iv) examination of the U.S. regulatory environment that would be affected by a change in accounting standards; (v) the impact on issuers; and (vi) human capital readiness.
Considering the time required to successfully implement a change in financial reporting, the SEC stated that should it make the decision in 2011 to incorporate IFRS, the earliest that U.S. companies would report under such a system would be approximately 2015 or 2016, although SEC staff have been asked to further evaluate this timeline as part of the work plan.
Posted on February 25, 2010
On Monday, the International Organization of Securities Commissions (IOSCO) published a final report entitled "Principles for Periodic Disclosure by Listed Entities". The report is intended to provide securities regulators with a framework for establishing or reviewing their periodic disclosure regimes. According to the report, its principles-based format "allows for a wide range of application and adaptation by securities regulators."
Specifically, the report identifies the following principles as being "essential" for periodic disclosure regimes: (i) periodic reports should contain relevant information; (ii) for those periodic reports in which financial statements are included, the persons responsible for the financial statements provided should be clearly identified and should state that the financial information provided is fairly presented; (iii) the issuer's internal control over financial reporting should be assessed or reviewed; (iv) information should be available to the public on a timely basis; (v) periodic reports should be filed with the relevant regulator; (vi) the information should be stored to facilitate public access; (vii) disclosure criteria; (viii) equal access to disclosure; and (ix) equivalence of disclosure.
Posted on February 3, 2010
Silver v. IMAX Corporation et al. [2009] O.J. Nos. 5573 and 5585 (S.C.J.)
Simon Bieber and Jennifer Imrie
On December 14, 2009, Justice van Rensburg of the Ontario Superior Court of Justice handed down two related rulings in the Silver v. IMAX Corporation litigation. The first (the “Leave Decision”) granted the plaintiffs leave to proceed with their class action against IMAX Corporation and certain individual respondents (collectively, the “IMAX Defendants”) under section 138.8 of Ontario’s Securities Act (“OSA”), while the second (the “Certification Decision”) certified the action, including both statutory and common law claims, as a class proceeding.
The Leave Decision is the first to consider the leave requirements for a statutory misrepresentation claim under the secondary market liability provisions in Part XXIII.1 of the OSA, while the Certification Decision appears to accept the “efficient market” (or “fraud on the market”) theory for common law misrepresentation claims. Justice van Rensburg permitted certification despite the defendant’s argument that the claim as pleaded is deficient for not alleging individual reliance by each member of the proposed class and accepted the plaintiffs’ argument that certification should extend to a global class of plaintiffs consisting of all persons who acquired securities of IMAX Corporation (“IMAX”) during the defined “Class Period” of February 17, 2006 to August 9, 2006 and who continued to hold some or all of those securities at the close of trading on August 9, 2006.
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Posted on January 29, 2010
On Wednesday, the U.S. Securities and Exchange Commission (SEC) approved the issuance of interpretive guidance respecting existing SEC disclosure requirements that apply to business or legal developments relating to climate change. While the guidance has yet to be published by the SEC, a speech by SEC Commissioner Luis A. Aguilar suggests that the SEC's release will clarify the responsibility of companies to discuss (i) the direct effects of existing and pending environmental regulation, legislation and treaties on a company's business, operations, risk factors and in MD&A; (ii) the indirect effects of such regulation on a company's business; and (iii) the effect on a company's business and operations related to the "physical changes to our planet caused by climate change". Commissioner Aguilar also suggested that companies should know their emissions information in order to evaluate risks and focus on investors when considering the materiality of information.
Posted on January 22, 2010
The Canadian Securities Administrators (CSA) today announced the adoption of National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104), and the related companion policy, along with the repeal of, or amendments to, a number of related instruments and policies. Insider reporting requirements and exemptions have been harmonized under NI 55-104 across all Canadian jurisdictions, except in the case of Ontario, where equivalent requirements will remain in the Securities Act (Ontario). Despite the difference in approach, the substance of the new requirements will be the same across the CSA jurisdictions. An earlier form of NI 55-104 was published in December 2008 for comment. While some changes where made to NI 55-104 in response to comments received, according to the CSA the final form of the instrument is substantively similar to the earlier proposal.
Specifically, NI 55-104 reduces the range of insiders required to file insider reports by introducing the concept of “reporting insider.” According to the CSA, this approach will focus the insider reporting requirement on a core group of insiders with the greatest access to material undisclosed information and the greatest influence over the reporting issuer. Interestingly, under NI 55-104, the concept of “reporting insider” includes a shareholder whose 10% beneficial ownership, control or direction is calculated based on post-conversion beneficial ownership of any convertible securities that are convertible within 60 days.
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Posted on January 22, 2010
Earlier this week, the Ontario Securities Commission (OSC) issued a report summarizing its compliance review of various types of investment funds. The review began in September 2008 in response to concerns respecting market turmoil and focused on assessing compliance by fund managers with Ontario securities laws. Funds were reviewed in three phases, beginning with money market funds, followed by non-conventional investment funds and finally focusing on hedge funds.
While the OSC noted "some instances of non-compliance" during site visits, the report states that no industry-wide compliance issues were observed. The report, however, makes a number of observations and includes suggested practices for fund managers.
Posted on January 18, 2010
The Ontario Securities Commission (OSC) has released the January 2010 edition of The Investment Funds Practitioner, a publication intended to assist those that regularly prepare public disclosure documents and applications for exemptive relief on behalf of investment funds. Authored by staff of the OSC's Investment Funds Branch, the Practitioner contains an overview of recent issues emerging from applications for discretionary relief, prospectuses and continuous disclosure documents. Specifically, the OSC provided a number of observations and practice points that may be of interest. Among other things, the publication considers the following:
- Responding to "novel applications" for relief from the various conflict provisions under Ontario's Securities Act (Act) and National Instrument 81-102 Mutual Funds (NI 81-102) based on IRC approval. The OSC reminded filers that the Canadian Securities Administrators deliberately chose to maintain the various conflict provisions in local securities legislation and codify only limited exemptions in National Instrument 81-107 Independent Review Committee for Investment Funds. The OSC stated that it intends to complete reviews to assess how the IRC approval system is working with existing codified exemptions.
- The OSC noted a number of "recurring issues" respecting the mergers and reorganizations of mutual funds, including applications missing required information and filers failing to properly factor in securities regulatory approval into the transaction planning process.
- The OSC also noted that it generally does not require a parallel application for relief from the conflicts of interest prohibitions under the Act where relief is sought under NI 81-102 to facilitate fund on fund arrangements that do not comply with all the conditions in section 2.5(2) of NI 81-102. The OSC indicated that it is of the view that the exemption codified under section 2.5(7) of NI 81-102 still applies even where the fund has obtained an exemption from some of the conditions in section 2.5(2).
- Filers were also reminded by the OSC that those wishing to receive a receipt for a (preliminary) prospectus that the (preliminary) prospectus and accompanying material should be received by the OSC on or before noon on the day the receipt is required.
- The OSC noted that while it has granted relief to file a prospectus beyond the 90 day period, it encourages filers to make applications for this type of relief prior to the expiration of the 90 day period.
Posted on January 15, 2010
The British Columbia Securities Commission (BCSC) recently issued a Notice of Adoption regarding its adoption as an urgent rule of BC Instrument 81-513 Self Dealing and related consequential amendments. BCI 81-513 and related consequential amendments are in response to the repeal of the sections of the British Columbia Securities Act that had, until September 28, 2009, contained similar requirements. Given that BCI 81-513 and related consequential amendments were adopted as an urgent rule, they can remain effective only for a maximum of 275 days. To remain effective, the BCSC must publish BCI 81-513 and related consequential amendments for comment and, as such, the Notice of Adoption is also a request for comment. The BCSC is accepting comments on the instrument and consequential amendments until February 21, 2010.
Posted on January 7, 2010
Last month, the Canadian Coalition for Good Governance (CCGG) released the 2009 edition of its "Best Practices in Disclosure of Executive Compensation Related Information". The guide is intended to "improve the overall quality of executive compensation disclosure in annual proxy circulars" by reviewing best practices and providing examples of disclosure meeting the criteria set out in its guidelines. According to the CCGG, truly effective disclosure is easy to find, easy to understand, accurate and complete and given in context so that the information has meaning. Specifically, the CCGG considered executive compensation disclosure in five areas, discussed below.
1. Build an independent compensation committee
While the CCGG observed that many issuers have appointed a compensation committee of solely independent directors comprising of members with diverse backgrounds, opportunities for improvement were identified. Specifically, the CCGG suggests identifying the compensation expertise of the committee members and establishing and disclosing the committee's work plan.
2. Develop an independent point of view
On this point, the CCGG states that most issuers have retained the services of a compensation consultant, with some companies reporting the fees paid. Despite a CSA requirement to name the consultant, however, the CCGG notes that not all issuers did so and recommends disclosing the fees paid to the consultant for work performed on behalf of the compensation committee and management, as well as a breakdown of such fees.
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Posted on December 21, 2009
On December 18, the Canadian Securities Administrators (CSA) published for comment proposed amendments to NI 51-101 Standards of Disclosure for Oil and Gas Activities, its companion policy and related forms. Among other things, the amendments would: (i) clarify the signing requirements of Form 51-101F3; (ii) amend the optional supplemental disclosure of reserves data in annual disclosure to provide for disclosure that is comparable to U.S. disclosure; (iii) add a requirement to discuss in annual disclosure the significant factors and uncertainties associated with properties for which no reserves have been developed; (iv) replace the requirement to announce the annual filings with a press release with the requirement to file on SEDAR a Form 51-101F4; and (v) limit the scope of NI 51-101 to evaluation and disclosure practices related to reserves and resources other than reserves. Comments on the proposed amendments are being accepted until March 19, 2010.
Posted on December 18, 2009
The Ontario Securities Commission (OSC) today released a notice regarding the disclosure of corporate governance and environmental matters by reporting issuers other than investment funds. Specifically, the OSC stated that it will conduct a review of issuers' compliance with NI 58-101 Disclosure of Corporate Governance Practices during 2010 in order to assess the adequacy of corporate governance disclosure in information circulars (and AIF and MD&A where applicable) filed in the spring of 2010.
With respect to environmental disclosure guidance, the OSC intends to issue guidance by December 2010 on compliance with environmental disclosure requirements under NI 51-102 Continuous Disclosure Obligations. For more information on issues surrounding environmental disclosure obligations, see Jeffrey Elliott's post of January 2009.
Posted on December 10, 2009
Charles R. Kraus
On September 23, 2009, United States Senator Richard Lugar introduced a Bill entitled the Energy Security Through Transparency Act of 2009 (ESTA), which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs for further consideration.
The progress of ESTA is of interest to Canadian oil and gas issuers with annual reporting obligations under the U.S. Securities Exchange Act of 1934. Among other things, ESTA proposes to require the U.S. Securities and Exchange Commission to issue rules requiring "resource extraction issuers" (defined as an issuer that engages in the commercial development of oil, natural gas, or minerals) to include in their annual reports information relating to any payments made by the issuer, a subsidiary or partner of the issuer, or an entity under the control of the issuer to a foreign government for the purpose of the commercial development of oil, natural gas, or minerals.
ESTA provides that the required disclosure shall include the type and total of all such payments (i) for all projects, and (ii) to each foreign government, and the term "payment" is defined to include taxes, royalties, fees, licenses, production entitlements, bonuses and other material benefits.
Posted on December 3, 2009
Effective November 27, 2009, the Toronto Stock Exchange has adopted amendments to Form 11 - Notice of Private Placement pursuant to which additional details are required concerning broker warrants and anti-dilution provisions as well as identification of any newly created insiders. The form also requires certification by a director or senior officer of the issuer.
Specifically, Form 11 has been amended to add a new section 3(j), which requires a description of any broker warrants (or options), including the number, exercise price, term to expiry and other significant terms. A new section 3(k) now requires a description of any anti-dilution provisions that provide an adjustment for events for which not all securities holders are compensated. With respect to insiders, the form now requires that any new insiders created as a result of the private placement be identified and specifically notes that the TSX may require the new insiders to complete and clear a Personal Information Form prior to the closing of the private placement. A director or officer of the issuer will also have to certify that the notice is complete and accurate and that it does not contain any misrepresentations.
Posted on December 1, 2009
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The Canadian Coalition for Good Governance (CCGG) recently published its 2009 edition of Best Practices in Disclosure of Director Related Information, a guide intended to "improve disclosure about directors." According to the CCGG, the purpose of the document is to "recommend disclosure practices that exceed the minimum requirements set out in the regulations." The guide also states that the most effective disclosure is easy to find and understand, accurate and complete and given in a context that gives the information meaning. Specifically, the guide deals with disclosure of director-related information in five separate sections, as outlined below.
Section A – Shareholder voting
This section discusses the methods of voting for directors preferred by the CCGG. An example of a form of proxy considered to be a "best practice" is included as well a list of issuers who have adopted a majority voting policy for their director elections. As the CCGG has previously stated, it recommends individual director voting using a checkbox to indicate voting preference (vote “for” or “withhold”) along with adoption of a majority voting policy. The CCGG also recommends that a report of voting results should be posted on SEDAR within 10 business days of an AGM and should include the results based on the number of proxy votes cast for or withhold from the election of directors and auditors, along with those cast for or against any company or shareholder sponsored resolutions. There is also a discussion on the results from the CCGG’s annual study on voting methods. Among other results highlighted from the study, the guide notes that 74% of companies in the S&P/TSX Composite Index now allow their shareholders to vote with respect to individual directors (contrasted with the 26% that still employ slate voting).
Section B – Director information
Section B provides guidance for companies that want to adopt “exemplary” disclosure practices and provides examples of how certain issuers have chosen to communicate information on matters such as director selection and orientation, background, share ownership, compensation and performance assessment. The CCGG encourages issuers to either adopt or adapt these disclosure practices.
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Posted on November 20, 2009
The Canadian Securities Administrators (CSA) today published a staff notice regarding its review of executive compensation disclosure subsequent to the adoption of the revised Form 51-102F6. The revised Form applies to financial years ending on or after December 31, 2008 and the notice follows a series of targeted reviews to assess compliance with the required disclosure obligations undertaken by staff of the BCSC, ASC, OSC and AMF.
While 62 of the 70 companies reviewed were considered to have generally met the requirements of Form 51-102F6, a number of disclosure issues were identified. While the notice does not purport to set out an exhaustive list of all the issues identified, it provides a summary of those issues, which in the CSA’s view are more significant, including: (i) failing to properly disclose performance goals and how they are tied to the executive’s compensation; (ii) failing to disclose benchmarks and if disclosed, failing to properly explain the benchmark’s components; (iii) a lack of explanation of how the trend in the performance graph compared to the trend in the issuer’s executive compensation over the prescribed period; (iv) improper disclosure under the summary compensation table; (v) failing to appropriately quantify the lifetime benefit under the pension plan benefit table; and (vi) failing to quantify termination and change in control benefits. Various other issues are also identified.
Further, the notice states that the CSA will continue to review executive compensation disclosure as part of their continuous review programs. In particular, the CSA state that they will focus in particular on disclosure relating to Compensation Discussion and Analysis, Summary Compensation Tables and termination and change in control benefits.
Posted on November 20, 2009
On November 20, 2009, the Canadian Securities Administrators (CSA) published CSA Staff Notice 51-330 Guidance Regarding the Application of Forward-Looking Information Requirements under NI 51-102 (the Staff Notice). The purpose of the Staff Notice is to outline results of the CSA’s continuous disclosure reviews conducted on compliance with the forward-looking information (FLI) requirements in National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102). These FLI requirements under NI 51-102 came into effect on December 31, 2007, replacing the previous requirements under NP 48. A wide range of documents were reviewed for the purposes of the continuous disclosure review (including AIFs and MD&A), and while a number of improvements were requested by staff in future filings, the reviews did not result in any issuers having to re-file any documents in order to correct identified deficiencies.
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Posted on November 12, 2009
Yesterday, Quebec's Autorité des marchés financiers (AMF) released its Continuous Disclosure Review Program Activity Report for the fiscal year ending March 31, 2009. The report presents the findings of the AMF's review of the continuous disclosure documents of Quebec-based companies and investment funds. The AMF stated in its release that it focused its reviews on financial services companies and those with high indebtedness given the credit and liquidity challenges experienced over the last year.
While the report found a high quality of disclosure records overall, the AMF noted that deficiencies were found in the application of accounting requirements, specifically with respect to financial instrument disclosure. Thus, the AMF encouraged issuers "to rigorously apply all GAAP and to pay special attention to new accounting requirements." The AMF also noted that for the 2009-2010 fiscal year, it will be particularly focused on disclosure relating to the upcoming changeover to IFRS and the recent amendments to the CICA Handbook regarding fair market measurements.
Posted on November 10, 2009
On November 5, the International Accounting Standards Board (IASB) and the U.S.Financial Accounting Standards Board (FASB) released a statement reaffirming their commitment to improving IFRS and U.S. GAAP and to bring about their convergence. The joint statement also described the boards' plans and milestone targets for individual projects.
Posted on November 2, 2009
Charles Kraus
On October 30, the U.S. Securities and Exchange Commission (SEC) announced the release of a staff accounting bulletin to update guidance "on how the agency's staff interprets accounting rules related to the oil and gas industry." The guidance is intended to correspond with rulemaking that the SEC approved in December 2008 to modernize its oil and gas company reporting requirements. The principal revisions of the guidance include:
- changing the price used in determining quantities of oil and gas reserves to use an average price based upon the prior 12-month period rather than year-end prices;
- eliminating the option to use post-quarter-end prices to evaluate write-offs of excess capitalized costs under the full cost method of accounting;
- removing the exclusion of unconventional methods used in extracting oil and gas from oil sands or shale as an oil and gas producing activity; and
- removing certain questions and interpretative guidance which are no longer necessary.
The guidance updates Topic 12 of the codification of staff accounting bulletins in order to make it consistent with the Commission’s Final Rule Release, Modernization of Oil and Gas Reporting, issued December 31, 2008.
Posted on October 16, 2009
The Canadian Securities Administrators today also published a notice regarding proposed amendments to National Instrument 45-106 Prospectus and Registration Exemptions, its companion policy and forms. The proposed amendments are intended to replace Canadian GAAP terms with IFRS terms, change disclosure requirements where IFRS contemplates different financial statements than existing Canadian GAAP, provide a 30-day extension for reporting issuers to include in an offering memorandum the first interim financial report in the year of adopting IFRS in respect of an interim period beginning on or after January 1, 2011 and clarify, amend or delete provisions that are no longer appropriate.
The Autorité des marchés financiers and the New Brunswick Securities Commission in Quebec and New Brunswick, respectively, are publishing staff notices for comment that set out the substantive proposed changes reflected in the proposals published by the other CSA jurisdictions. However, due to the requirement to publish proposed amending instruments in French and English, and because French IFRS terminology has not been settled, these regulators are not yet able to publish the proposed amendments for comment. Further amending instruments dealing with French IFRS terminology are expected to be published in early 2010.
Comments on the proposals are being accepted by the CSA until January 18, 2010.
Posted on October 16, 2009
The Canadian Securities Administrators published a notice today regarding proposed amendments to National Instrument 81-106 Investment Fund Continuous Disclosure, its companion policy and certain other rules and forms that address the upcoming changeover from Canadian GAAP to International Financial Reporting Standards (IFRS). This notice forms part of a series of notices that address various changes required to be made to securities rules to accommodate the transition to IFRS. The proposals are intended to accommodate the transition to IFRS by requiring that investment funds prepare financial statements in accordance with Canadian GAAP for publicly accountable enterprises and report compliance with IFRS for financial years beginning on or after January 1, 2011 (for financial years beginning on or after January 1, 2011, Canadian GAAP for publicly accountable enterprises will be IFRS incorporated into the CICA Handbook). Terminology found within NI 81-106 will also be updated to accommodate the transition. The proposed amendments are not intended to substantively alter securities law requirements but are required in order to cover terminology differences between Canadian GAAP and IFRS and to reflect changes to financial statement presentation that will result. Two of the changes highlighted in the notice in this respect are the classification of securities issued by investment funds and consolidation.
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Posted on October 9, 2009
As described in an earlier post, the CSA recently published the final version of National Instrument 23-102 Use of Client Brokerage Commissions (NI 23-102) and the accompanying companion policy, which relate to soft dollar arrangements. The CSA has now also released proposed amendments to Form 81-101F2 Contents of Annual Information Form and Form 41-101F2 Information Required in an Investment Fund Prospectus. The amendments to the forms are intended to ensure consistency with the disclosure requirements in NI 23-102. Comments are being accepted by the CSA until January 6, 2010.
Posted on October 6, 2009
On October 2, the U.S. Securities and Exchange Commission (SEC) announced the upcoming expiration of the exemption from section 404 of the Sarbanes-Oxley Act currently enjoyed by public companies with a public float below $75 million. Section 404 of SOX requires public companies and their independent auditors to report on the effectiveness of internal controls. The extension for small public companies is scheduled to expire beginning with the annual reports of companies with fiscal years ending on or after June 15, 2010. The exemption had been set to expire for fiscal years ending on or after December 15, 2009, but was extended due to the recent publication of a study by the SEC's Office of Economic Analysis regarding whether post-2007 reforms were having the intended effect of "facilitating more cost-effective internal controls evaluations and audits." The study found a "significant reduction" in compliance costs following the 2007 reforms.
Certification of effectiveness of internal control over financial reporting is also required in Canada under NI 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings. In contrast to the U.S., however, NI 52-109 does not require auditor attestation and permits "venture issuers" to omit certain certifications relating to internal controls over financial reporting and disclosure controls and procedures.
Posted on September 25, 2009
The Canadian Securities Administrators (CSA) today published for comment proposed amendments to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107) and its companion policy as well as related consequential amendments to National Instrument 14-101 Definitions. As previously discussed, International Financial Reporting Standards (IFRS) will apply to Canadian publicly accountable enterprises for financial years beginning on or after January 1, 2011. The amendments are intended to "provide an efficient transition mechanism for issuers and registrants to reflect the change to IFRS".
The Canadian Accounting Standards Board (AcSB) has announced that it plans to incorporate IFRS into the Handbook of the Canadian Institute of Chartered Accountants (the CICA Handbook) as “Canadian GAAP for publicly accountable enterprises.” As a result, Part 1 of the CICA Handbook will contain a version of Canadian GAAP to be known as Canadian GAAP for publicly accountable enterprises that will apply for financial years beginning on or after January 1, 2011, and Part IV will contain a version known as Canadian GAAP for public enterprises that are the standards constituting Canadian GAAP before the mandatory effective date (current Canadian GAAP).
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Posted on July 24, 2009
Staff of the Canadian Securities Administrators (CSA Staff) released a staff notice today summarizing the results of their continuous disclosure review program for the 2009 fiscal year. During fiscal 2009, which ended March 31, CSA Staff completed 1,094 continuous disclosure reviews of reporting issuers other than investment funds, a 28% increase from the last fiscal year. CSA Staff noted that the deficiencies in continuous disclosure were generally in either the Management's Discussion and Analysis (MD&A) or financial statements and provided highlights of some of the more common deficiencies. Review outcomes were categorized and 48% of outcomes fell into the "prospective changes" category, which required the issuer to make changes in its next filing as a result of identified deficiencies. CSA Staff also identified areas of focus for the next fiscal year, including notably, disclosures of IFRS changeover plans in the MD&A.
Posted on July 16, 2009
The U.S. Securities and Exchange Commission has now published proposed amendments to its rules in order to "improve the disclosure shareholders of public companies receive regarding compensation and corporate governance, and facilitate communications relating to voting decisions." The proposals, announced earlier this month, would expand the scope of compensation disclosure and analysis to require disclosure of a company's overall compensation program as it related to risk management. Disclosure requirements regarding the qualifications of directors and nominees would also be extended and certain issues relating to the solicitation of proxies and the granting of proxy authority would be clarified. Comments on the proposals are being accepted by the SEC until September 15, 2009.
Posted on July 13, 2009
 |
| Secretary Geithner speaking in February |
Citing the "enormous scale" and "critical role" of over-the-counter (OTC) derivatives in the financial markets, U.S.
Treasury Secretary Timothy Geithner outlined the steps the
Obama Administration intends to take to regulate OTC derivatives in
testimony to Congress on July 10. The steps include: (i) requiring that all standardized derivative contracts be cleared through well-regulated central counterparties and executed either on regulated exchanges or regulated electronic trade execution systems; (ii) encouraging greater use of standardized OTC derivatives through capital requirements and other measures to facilitate migration of such derivatives onto central clearinghouses and exchanges; (iii) requiring all OTC derivative dealers and other major market participants to be subject to supervision and registration; (iv) making OTC derivative markets fully transparent by the imposition of recordkeeping and reporting requirements; (v) providing the
Securities and Exchange Commission (SEC) and the
Commodity Futures Trading Commission (CFTC) with authority to enforce the regulation of OTC derivative markets; (vi) working with the SEC and CFTC to improve standards governing who can participate in OTC derivative markets and (vii) working with international counterparts to ensure that the U.S. regulatory regime is matched by effective regimes internationally. The testimony follows on
recent testimony by SEC Chairman Mary Schapiro on the same subject.
Posted on July 13, 2009
The U.K. Financial Services Authority (FSA) released proposals on July 9 that would require financial firms to publish their complaints data every six months. The required information would include the number of complaints opened and closed, the percentage of claims closed within eight weeks and the percentage upheld. The FSA would also publish results from the whole sector twice a year. The FSA is accepting comments on the proposals until October 30, 2009.
Posted on June 19, 2009
On June 19, 2009, the Canadian Securities Administrators (the CSA) published for comment proposed amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure and its related forms.
The proposed amendments represent the culmination of many years of review and research undertaken by securities and insurance regulators under their Joint Forum initiative to develop a better approach to providing meaningful and effective disclosure to mutual fund investors. As such, the proposed amendments announced in this notice form the first phase of this joint approach. The second phase involves a review of the overall disclosure regime for mutual funds with a view to reducing duplication.
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Posted on June 9, 2009
On June 5, 2009, the British Columbia Securities Commission published BC Notice 2009/07 Advance Notice of BCI 13-502 Electronic filing of reports of exempt distribution and Related Documents. This notice announced the expected implementation, effective July 30, 2009, of BC Instrument 13-502 and its related companion policy. BCI 13-502 requires issuers who file a report of exempt distribution and pay fees in connection with that report to do so electronically through BCSC e-services.
Posted on May 20, 2009
Effective for the 2009 proxy season, the Canadian Securities Administrators (CSA) have adopted new requirements for executive compensation disclosure (the New Disclosure Requirements). Stikeman Elliott's "Executive Compensation After the Boom" highlights current trends in executive compensation and their impact on compensation decisions. The following excerpt reviews the trend towards wealth accumulation analysis.
Wealth Accumulation Analysis
Focussing on the different tools at the disposal of the board or compensation committee in developing pay packages, another emerging trend is the move towards a broad-based and more holistic wealth accumulation analysis.
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Posted on March 26, 2009
Keith Chatwin and Rose Anderson | PDF Version | Version française
Although the disclosure of reserves has been mandated in Canada for a considerable period of time, both pursuant to National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101) since September 2003 and prior to that pursuant to National Policy 2B, those policies have not, until recently, ventured further down the commerciality spectrum to provide guidance in respect of contingent and prospective resources.
Not surprisingly, while disclosure in relation to proved and probable reserves, and to a lesser extent possible reserves, has improved, the same cannot be said of resource disclosures. Just as investors have benefited from the enhanced comparability of reserve reports by virtue of the consistency of disclosure in relation to reserves, so they have suffered from the relative lack of guidance in relation to resource disclosures and the resultant diminished comparability and consistency.
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Posted on March 23, 2009
Effective for the 2009 proxy season, the Canadian Securities Administrators (CSA) have adopted new requirements for executive compensation disclosure in the form of the revised Form 51-102F6 (the New Disclosure Requirements). The following excerpt from "Executive Compensation After the Boom" reviews the use of compensation consultants.
Compensation Consultants
Benchmarking analysis and information is one of the key services provided by compensation consultants. Given their expertise and access to often proprietary information on industry practices, compensation consultants can also help to structure compensation packages. Under the SEC’s disclosure rules, the Compensation Discussion & Analysis (CD&A) is required to include disclosure on whether a company has relied on compensation consultants in determining what to pay its executives.1 While this requirement was not included by the CSA in the new disclosure requirements, it is required disclosure under National Instrument 58-101 Disclosure of Corporate Governance Practices (NI 58-101).2 This disclosure is proposed to be expanded pursuant to recently proposed amendments to NI 58-101.3 The expanded disclosure is proposed to include a requirement to identify any compensation consultant or other adviser that is used, a summary of their mandate, when they were first retained, whether they have performed any other services for the company (and if so, a description of the nature of that work) and the aggregate fees billed by the consultant or adviser in the last two financial years for professional services relating to executive compensation and for other professional services.
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Posted on March 17, 2009
Mike Devereux and Ramandeep K. Grewal | PDF Version | Version française
On October 24, 2008, the Canadian Securities Administrators (the CSA) adopted a revised form of National Instrument 52-109 Certification of Disclosure of Issuers’ Annual and Interim Filings (NI 52-109 or the Instrument).[1] Effective December 15, 2008, NI 52-109 has introduced new interim and annual certification requirements and new disclosure requirements for interim and annual management discussion and analysis (MD&A).
Under the revised NI 52-109, the issuer’s chief executive officer (CEO) and chief financial officer (CFO), or other persons performing similar functions (referred to as certifying officers), are required to personally certify as to certain matters. The revised NI 52-109 expands significantly upon the items that were previously included in interim and annual certificates. These expanded certifications may also have a significant impact on related MD&A depending on the state of an issuer’s design and effectiveness of disclosure controls and procedures (disclosure controls) and internal control over financial reporting (internal control).
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Posted on March 10, 2009
Effective for the 2009 proxy season, the Canadian Securities Administrators (CSA) have adopted new requirements for executive compensation disclosure in the form of the revised Form 51-102F6 (the New Disclosure Requirements). The following excerpt from "Executive Compensation After the Boom" will review the new disclosure requirements as they affect the principle of benchmarking.
Benchmarking
Developing an appropriate compensation package does not stop at pay-for-performance considerations. Once a company has determined the types of performance that it seeks to reward, there remains the challenge of measuring performance to determine if and when rewardable goals have been attained, and when attained, how they should be rewarded. For the purpose of setting performance targets, companies can look to comparable internal or external peer groups (i.e. other similarly situated companies) or forecasted budgets. Analysis based on peer group evaluation, or benchmarking as it is referred to in some circumstances, can be useful to the development of compensation packages in a number of different ways. In relation to performance targets, peer group analysis can be used to determine the appropriate target levels to award. While companies may primarily rely on internal budgets for these numbers, setting targets relative to peer group performance can be useful in circumstances of economic uncertainty and instability, where external market forces might have an unexpected impact on industry performance in general.
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Posted on February 27, 2009
The CSA published a notice today to provide guidance with respect to the disclosure of oil and gas resources other than reserves data. In the notice, the CSA noted that while disclosure of resources not included in reserves data is not required under National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities, such disclosure "must be consistent with all applicable securities laws." The notice was published in response to "recurring issues" found in the CSA's review of such disclosure.
Posted on February 25, 2009
Effective for the 2009 proxy season, the Canadian Securities Administrators (CSA) have adopted new requirements for executive compensation disclosure in the form of the revised Form 51-102F6 (the New Disclosure Requirements). The following excerpt from "Executive Compensation After the Boom: A Guide for Canadian Public Companies in 2009" will review the new disclosure requirements as they affect the principle of pay-for-performance.
Pay-for-Performance
The New Disclosure Requirements call for a new narrative form of discussion and analysis of executive compensation (called Compensation Discussion & Analysis, or CD&A). CD&A is required to contain a discussion of, among other things, the objectives of the compensation program, what the compensation is designed to reward, the elements that comprise the compensation package and why the company chooses to pay what it pays, as well as a discussion of how each element of compensation and the company’s decision about such element fits into its overall compensation objectives.1
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Posted on February 24, 2009
On September 30, 2008, the Investment Industry Regulatory Organization of Canada (IIROC) issued Notice 2008-0113 regarding the adoption of International Financial Reporting Standards (IFRS). Notice 2008-0113 stated that IIROC would require progress reports on the adoption of IFRS from dealer members by April 1, 2009.
On February 23, 2009, however, IIROC released a notice stating that in lieu of a progress report, dealer members will be required to complete a survey, which will be sent to the CFOs of each dealer member. The purpose of the survey will be to "assist dealer members in their self-assessment of the impact to adopt IFRS" and IIROC intends to use the results to "identify implementation issues and next steps".
Posted on February 19, 2009
Canadian public companies and their boards have a number of significant issues to consider and address as we enter a new year, including increased investor and regulatory scrutiny. The market turmoil and economic slowdown that gripped the economy in 2008 also continues to run its course. In the face of these and other significant challenges, it is time again for public companies to address issues associated with the annual proxy season. Executive compensation is again in the spotlight, partly on account of the significant disclosure reforms adopted by the Canadian Securities Administrators effective for the 2009 proxy season, and partly on account of increased public awareness of compensation issues such as executive clawbacks, pay-for-performance and golden parachute or change of control payments fuelled in part by the failure of financial firms south of the border.
As such, Stikeman Elliott has prepared this guide to help navigate through these issues. Part 1 of the guide includes a discussion of the various elements available in designing compensation packages for Canadian executives as well as market developments and other issues relating to these elements. Part 2 highlights current trends in executive compensation and their impact on compensation decisions.
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Posted on February 18, 2009
The U.S. Securities and Exchange Commission (SEC) recently published a final rule requiring companies to incorporate interactive data, using eXtensible Business Reporting Language (XBRL), into financial statements. Issuers will have to "tag" data using a standard taxonomy and provide the interactive data as an exhibit to periodic and current reports and registration statements as well as transition reports for a change in fiscal year. Further, financial statements in interactive data format will have to be posted on a filer's corporate website. The requirements are intended to improve the usefulness of financial information to investors. "Through interactive data, what is currently static, text-based information can be dynamically searched and analyzed, facilitating the comparison of financial and business performance across companies, reporting periods, and industries."
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Posted on February 11, 2009
David Taniguchi, Charles Kraus and Kristi Kasper | PDF Version | Version française
As one of its last acts of 2008, the U.S. Securities and Exchange Commission (the SEC) issued its final rule adopting revisions to the oil and gas reporting disclosure requirements applicable to all U.S. domestic and most foreign issuers (the Final Rule)1. The rule revisions will become effective on January 1, 2010, and issuers will be required to begin complying with them in registration statements filed on or after that date, and in annual reports on Form 10-K and Form 20-F for fiscal years ending on or after December 31, 2009. Citing the potential for incomparable disclosures, the SEC will not permit issuers to follow the new rules prior to their effective date.
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Posted on January 14, 2009
Jeffrey Elliott | PDF Version | Version française
In the last few years, climate change considerations have begun to figure more prominently in the investment decisions of Canadians. This, along with the complexities of complying with the existing regulations (with the prospect of more to come) designed to reduce greenhouse gas (GHG) emissions, has led the Ontario Securities Commission (OSC) and the accounting profession to focus on the disclosure of climate change issues by Canadian reporting issuers to ensure that investors are fully informed. Two recent initiatives highlight this trend.
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Posted on January 9, 2009
Citing the challenges facing issuers in preparing financial statements in light of current economic conditions, the CSA have published Staff Notice 51-328 Continuous Disclosure Considerations Related to Current Economic Conditions. The Staff Notice notes the importance to investors of continuous disclosure and addresses the topics the CSA are focusing on in their review of continous disclosure filings.
Posted on December 19, 2008
Silver v. IMAX Corporation, [2008] O.J. No. 2751 (S.C.J.) and Ainslie v. CV Technologies Inc., [2008] O.J. No. 4891 (S.C.J.)
Alan D'Silva and Simon Bieber | PDF Version | Version française
The interpretation of several key provisions under Part XXIII.1 of the Ontario Securities Act (OSA) was recently considered by the Ontario Superior Court of Justice in the context of proposed secondary market securities class actions in Silver v. IMAX Corporation (IMAX) and Ainslie v. CV Technologies Inc. (CV Technologies).
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Posted on December 18, 2008
On December 18, 2008, the CSA published for comment proposed National Instrument 55-104 Insider Reporting Requirements and Exemptions, its Companion Policy and related consequential amendments. The Proposed Instrument sets out the main insider reporting requirements and exemptions for insiders across Canada, with the exception of Ontario, where the Securities Act will govern the main insider reporting requirements. Despite this exception, the substance of the requirements and the reporting deadlines for insider reporting will be the same across the CSA jurisdictions.
The CSA's intention is to streamline and harmonize insider reporting by consolidating requirements in a single instrument. NI 55-104 also proposes specific changes to the insider reporting regime, specifically, it would:
- reduce the number of persons required to file insider reports;
- accelerate the insider report filing deadline from 10 calendar days to five;
- make reporting requirements for stock-based compensation arrangements simpler and more consistent;
- allow issuers to file an "issuer grant report" in order to facilitate reporting of stock-based compensation arrangements; and
- require late filings by insiders to be disclosed in an issuer's information circular.
The CSA will accept comments on the proposals until March 19, 2009.
Posted on December 17, 2008
Subsequent to a review of compliance with MI 52-109 Certification of Disclosure in Issuers' Annual Interim Filings (now replaced by NI 52-109) , the CSA have published CSA Staff Notice 52-315. The Staff Notice outlines the review's results and "provides guidance to issuers and certifying officers in complying with the certification requirements." The review focused on two aspects of compliance: (i) whether the correct form of certificate was filed; and (ii) whether an issuer's annual MD&A contained disclosure regarding the certifying officers' conclusions with respect to the effectiveness of disclosure controls and procedures.
While the CSA found that most issuers filed the correct form of certificate, 28% of issuers sampled failed to include disclosure in annual MD&A regarding the effectiveness of disclosure controls and procedures. Compliance with this requirement was found to be higher with TSX Issuers (80% compliance) than with Venture Issuers (38% compliance) or CNQ Issuers (40% compliance).
The CSA noted that "a significant percentage" of issuers did not comply with certification requirements and stated that it will actively follow up on identified deficiencies.
Posted on December 11, 2008
On December 10, the British Columbia Securities Commission published proposed BC Instrument 13-502 Electronic filing of reports of exempt distribution. The BCSC receives about 7,000 exempt distribution reports each year, over 5,000 of which are in paper format, and the proposed Instrument would require that issuers file the reports and pay related fees electronically. The BCSC hopes that electronic filing will improve compliance and enforcement capabilities and allow for a reduction of the time it takes to post the reports on its website.
Posted on October 24, 2008
The CSA and the Canadian Council of Insurance Regulators, comprising the Joint Forum of Financial Market Regulators, have released their proposed Framework 81-406 Point of sale disclosure for mutual funds and segregated funds. This framework set out concepts and principles reflecting the Joint Forum’s vision for more meaningful and effective disclosure.
Prior to publishing proposed changes to existing securities laws required to implement this framework, the CSA is seeking feedback on the proposal. Comments may be submitted by December 23, 2008.
Posted on October 24, 2008
The OSC has published notice of Ministerial Approval of the revised National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (previously published in the OSC Bulletin on August 15, 2008, click here for our previous post) and has confirmed that new rule, and related forms and companion policy, will come into force on December 15, 2008.
As a consequence of the implementation of the revised National Instrument 52-109, CEO and CFO certifications filed under the revised rule will be required to include, among other things, a certification that the CEO and CFO have evaluated the effectiveness of the issuer's internal control over financial reporting and have caused the issuer to disclose their conclusions about such effectiveness in the issuer's MD&A. The revised rule also contains new forms of certifications for venture issuers and for issuers completing an IPO or reverse-takeover.
As a consequence of these amendments, the MD&A form (Form 51-102F1) will also be amended, effective December 15, 2008, to include specific reference to the disclosure required to be included in the MD&A under the revised certification rule.
Posted on October 21, 2008
Simon Romano, Ramandeep Grewal and Daniella Laise | PDF Version
On September 18, 2008, the CSA published their final rule regarding the repeal and substitution of the current executive compensation disclosure form, also known as Form 51-102F6 (the Current Form). Under this rule, a revised Form 51-102F6 (the New Form) will be implemented, significantly changing current requirements with respect to disclosure of executive compensation and related matters.
The CSA published their initial proposals for the overhaul of executive compensation disclosure on March 29, 2007 (the 2007 Proposal) and the Current Form is a result of the subsequent comment and review process. The 2007 Proposal was based to a significant extent on changes adopted by the U.S. Securities and Exchange Commission (the SEC) in August 2006. Following receipt of substantial comments on the 2007 Proposal, the CSA republished a revised proposal on February 22, 2008, which was further revised and published as a final rule on September 18, 2008. The New Form introduces significant changes to the executive and director compensation disclosure requirements from those set out in the Current Form. As currently stated by the CSA, they expect this disclosure to apply in respect of financial years ending on or after December 31, 2008.
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Posted on October 3, 2008
The OSC has adopted OSC Policy 51-604 Defence for Misrepresentations in Forward-Looking Information. The purpose of this Policy is to outline the OSC’s views on some of the policy considerations underlying the defence for misrepresentations in forward-looking information contained in an issuer’s disclosure. The Policy explains how the OSC approaches the interpretation of certain aspects of the defence, including: (i) the “proximate” requirement; (ii) the required content of applicable risk factor and assumption disclosure; (iii) the “reasonable basis” requirement; and (iv) the operation of the defence with respect to oral statements containing forward-looking information.
For a more detailed analysis of the original proposal on which the Policy is based, see our update of June 2006.
Posted on October 2, 2008
On September 30, IIROC published a notice setting out its position and providing guidance to its Dealer Members regarding the adoption of IFRS. As they are considered to be "publicly accountable enterprises", Dealer Members will also be subject to the Canadian Accounting Standards Board's decision to move from Canadian GAAP to IFRS as of January 1, 2011. This notice sets out IIROC's views on some of the transition issues raised by the move to IFRS for Dealer Members, including IIROC's decision not to permit early adoption prior to January 1, 2011. The notice also reminds Dealer Members that they are required to conduct their own firm-specific impact assessments and conversion planning (which may require the input of outside expertise), and that they will be required to submit progress reports on their conversion plans, with the first report to be due by April 1, 2009. While the conversion date is January 1, 2011, as set out in the notice, Dealer Members will need to start planning for and implementing necessary changes well prior to 2011, including running parallel IFRS-based accounting records for up to a year prior to conversion. Some of the critical and regulatory reporting dates are also set out in the notice.
Posted on September 26, 2008
On September 23, 2008, the SEC issued amendments to its rules relating to foreign private issuers, which are intended to enhance information available to investors. Of note, the amendments will allow reporting foreign issuers to assess their eligibility to use the rules and special forms available to foreign private issuers once a year rather than continuously. The reporting deadline for annual reports by foreign private issuers, however, will be accelerated and disclosure requirements will be changed.
Posted on September 19, 2008
On September 18, the CSA announced that it was adopting Form 51-102F6 Statement of Executive Compensation (in respect of financial years ending on or after December 31, 2008) as well as consequential amendments to NI 51-102 Continuous Disclosure Obligations and other forms in order to improve the quality of executive compensation disclosure. The new form and amendments are the result of a process begun in 2007.
Whereas under the old form, "investors are provided with fragmented compensation information", the new form requires the disclosure of all compensation awarded to certain executives and directors in a more comprehensive way. Provided all ministerial approvals are obtained, the changes will come into force on December 31, 2008.
Posted on September 8, 2008
On August 12, 2008, the Minister of Finance approved amendments, to come into force today, regarding investment fund continuous disclosure and the contents of Annual Information Forms. The proposed amendments were originally published on June 20, 2008, and described in our earlier post.
Among other things, these amendments:
- modify the requirements regarding the calculation of net asset value following the introduction of Section 3855 Financial Instruments - Recognition and Measurement of the CICA Handbook; and
- clarify/correct certain provisions of NationaI Instrument 81-106 Investment Fund Continuous Disclosure.
Posted on August 29, 2008
The CSA have adopted National Policy 12-203 Cease Trade Orders for Continuous Disclosure Defaults (“NP 12-203”).
NP 12-203 provides guidance as to how the CSA will respond to certain types of continuous disclosure defaults and:
- modernizes, harmonizes and streamlines existing practices relating to cease trade orders (CTOs) including general CTOs and management cease trade orders (MCTOs);
- provides guidance for issuers as to the circumstances in which the CSA regulators will issue a general CTO or an MCTO;
- explains factors the CSA regulators will consider when evaluating an application for an MCTO; and
- describes what other actions issuers need to undertake if the CSA regulators issue an MCTO.
Posted on August 29, 2008
On Wednesday, the U.S. SEC voted to modernize and update disclosure requirements for foreign companies offering securities in U.S. markets. The amendments seek to improve access to such information by providing American investors with instant electronic access to foreign company disclosure on the internet and in English. The full text of the rules will be published by the SEC shortly.
Posted on August 19, 2008
The SEC announced a successor to its EDGAR database today, which it states will provide faster and easier access to financial information. The new Interactive Data Electronic Applications (IDEA) will first supplement, but eventually replace EDGAR. IDEA will collate information from individual forms and allow investors to create reports and analysis, as opposed to the current system, which only allows investors to review one form at a time.
Posted on August 15, 2008
The CSA today published notice of National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109). The purpose of this notice is to confirm the repeal and replacement of MI 52-109 (the Certification Rules) and all related forms, as well as consequential amendments to Form 51-102 F1 Management’s Discussion & Analysis (the MD&A Form). NI 52-109 seeks to improve the quality and reliability of disclosure by requiring a CEO, CFO, or someone performing similar functions to personally certify certain prescribed representations.
Pursuant to these proposed amendments to the Certification Rules, in addition to the certifications that an issuer’s CEO and CFO are required to make today, they will also have to certify that they have evaluated the effectiveness of the issuer's internal control over financial reporting and have caused the issuer to disclose their conclusions about such effectiveness in the issuer's MD&A. (Today, the certificates include representations about the design of disclosure controls and procedures and internal control over financial reporting, and only as to the effectiveness of disclosure controls and procedures).
Under the amended Certification Rules, venture issuers will not be required to include any representations in their certificates regarding disclosure controls and procedures or internal control over financial reporting (currently, venture issuer’s have been given an exemption from including these representations by way of a blanket order or equivalent issued by securities regulators).
These amendments are scheduled to come into effect on December 15, 2008.
Posted on August 13, 2008
The CSA have released CSA Staff Notice 51-326 Continuous Disclosure Review Program Activities for Fiscal 2008, which summarizes the results of its continuous disclosure review program of reporting issuers, excluding investment funds, for the fiscal year ending March 31, 2008. The review identifies common deficiencies in disclosure documentation and provides a statistical summary of outcomes.
Posted on July 31, 2008
On July 30, 2008, the U.S. Securities and Exchange Commission (SEC) announced new guidance for public companies with respect to investor disclosure on corporate websites. Citing the development of the internet and the emergence of social networking since the last time it issued such direction, the SEC guidance clarifies how companies can develop their websites while complying with securities regulations.
Posted on July 11, 2008
The purpose of this staff notice is to provide the following update on the status of the proposed repeal and replacement of Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (the “Certification Rule”):
- based on comments received in response to the proposed repeal and replacement the CSA do not anticipate making any material amendments to the materials as proposed; and
- the restated Certification Rule is expected to come into force, as earlier indicated, on December 15, 2008.
The CSA have only issued this status notice at this time, indicating that the final restatement of the proposed Certification Rule is to follow. If the Certification Rule is revised as was proposed in April 2008, issuers will be required to add, among other things, certifications regarding the following matters to their existing certificates: (i) the design of internal control over financial reporting (ICFR) to a reasonable assurance standard, (ii) the control framework used to design the ICFR and (iii) any material weaknesses relating to design.
Posted on July 4, 2008
CSA Staff Notice 52-321 is an update to CSA Concept Paper 52-402 published in February 2008 and sets out conclusions that the CSA staff have reached on the following issues (which represent some but not all issues raised in the concept paper):
- Early adoption of IFRS: Staff are prepared to recommend exemptive relief for issuers wanting to transition to IFRS before January 1, 2011. However, if a domestic issuer has previously filed financial statements prepared in accordance with Canadian GAAP or US GAAP for interim periods in the first year that the issuer proposes to adopt IFRS the staff will recommend that the issuer file revised interim financial statements prepared in accordance with IFRS-IASB, revised interim management discussion and analysis, and new interim certificates.
- Staff are proposing to retain the exemption in NI 52-107 for a domestic issuer that is also an SEC issuer to continue to use US GAAP.
- Staff are proposing to retain references to IFRS-IASB (instead of referring to post 2011 principles as Canadian GAAP), however, issues relating to the availability of an appropriate French translation of IFRS and reference to both IFRS-IASB and Canadian GAAP are continuing to be considered.
Posted on July 4, 2008
The CSA have approved amendments to NI 51-102, 51-102F3 Material Change Report, NI 52-108 Auditor Oversight and NI 81-106 Investment Fund Continuous Disclosure. The changes are primarily of a technical nature required in order to conform these rules to the recent harmonization of securities laws among passport jurisdictions, and are effective July 4, 2008.
Additional amendments have also been made to section 9 of NI 51-102 with respect to proxy solicitation in order to exempt certain types of public solicitations from the requirement to send a proxy circular (to conform with what is currently required under the CBCA).
Posted on June 24, 2008
The CSA have approved amendments to NI 81-106, NI 81-106F1 and the related Companion Policy which will also result in changes to NI 81-102 Mutual Funds and the related Companion Policy, Form 81-101F2 Contents of Annual Information Form, and Form 41-101F2 Information Required in an Investment Fund Prospectus.
These amendments, scheduled to come into force on September 8, 2008, have been made further to a proposal and request for comments published on June 1, 2007 and are intended primarily to modify the requirements regarding the calculation of net asset value following the introduction of Section 3855 Financial Instruments -- Recognition and Measurement of the CICA Handbook; and clarify or correct certain provisions of the Instrument.
Posted on June 24, 2008
The CSA have approved amendments to NI 55-102 effective June 13, 2008.
Amendments have been made to SEDAR filing procedures as well as to Form 55-102F1 Insider Profile, Form 55-102F2 Insider Report, Form 55-102F3 Issuer Profile Supplement and Form 55-102F6 Insider Report. These amendments are mostly of a house-keeping nature intended to streamline the filing and flow of information on SEDI.
Posted on June 11, 2008
CSX Corporation v. TCI and 3G Fund, June 11, 2008 | 08 CV 02764, U.S. District Court (S.D. N.Y.).
Alex Colangelo
U.S. Court deems hedge fund beneficial owners of shares due to arrangements designed to avoid disclosure obligations. The Court, however, finds itself constrained from ordering remedy sought by target company.
In a somewhat empty victory for the plaintiff railroad company, the U.S. District Court for the Southern District of New York found that the defendant hedge funds employed surreptitious means to avoid disclosure requirements while accumulating shares of CSX. Despite its findings, the District Court found itself restrained by precedent from preventing TCI and 3G Fund from exercising the votes associated with the shares they acquired during the time they were offside disclosure obligations. The plaintiff, therefore, had to settle for an injunction inhibiting the defendants from any future violations of disclosure obligations.
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Posted on June 10, 2008
Ralph A. Hipsher and Kenneth G. Ottenbreit | Version française
The Ontario Securities Commission has recently granted relief to dealers distributing foreign securities by way of private placement into Canada to address uncertainties caused by new forward-looking information disclosure requirements.
Effective December 31, 2007, the Canadian Securities Administrators (CSA) made significant amendments to forward-looking information disclosure requirements under continuous disclosure rules applicable to Canadian reporting issuers. The Ontario Securities Commission (OSC) also concurrently amended requirements relating to offering memoranda disclosure contained in OSC Rule 45-501. As a result of these amendments to OSC Rule 45-501, any offering memorandum provided to purchasers in Ontario that contains material forward-looking information (including future-oriented financial information and financial outlooks) is required to also contain certain prescribed forward-looking information disclaimers or safe-harbour type of disclosure. While this disclosure is similar to safe-harbour disclosure provided under U.S. or foreign securities law requirements, it also requires the issuer to address additional matters not typically encompassed by the equivalent non-Canadian disclosure.
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Posted on June 2, 2008
OSC Notice 81-709 summarizes findings relating to the OSC’s continuous disclosure review of conventional mutual funds. The notice primarily highlights compliance issues with NI 81-106 disclosure matters and, while focussed on conventional mutual funds, includes guidance of benefit to closed-end and exchange traded funds.
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Posted on March 18, 2008
Simon Romano and
Ramandeep Grewal |
Version française
The Canadian Securities Administrators (CSA) published Concept Paper 52-402 (Concept Paper) on February 15, 2008 to discuss ramifications for securities rules as a result of the impending transition from Canadian GAAP to International Financial Reporting Standards (IFRS, as issued by the International Accounting Standards Board (IASB)). As the Canadian Accounting Standards Board (AcSB) has adopted a transition plan to move to IFRS for years beginning on or after January 1, 2011, the CSA must now consider implications of this move on securities laws and regulations.
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Posted on March 4, 2008
Simon Romano and Ramandeep Grewal | Version française
Venture issuers get some early relief as Canadian Securities Administrators (CSA) work towards a final proposal to incorporate certifications as to effectiveness of internal controls.
Multilateral Instrument 52-109 Certification of Disclosure of Issuer's Annual and Interim Filings (Certification Rule) finds itself again subject to a further amendment proposal. As of the first year-end following June 30, 2006, most issuers have been required to file full interim and annual certificates. These certificates have required the CFO and CEO to provide certifications with respect to:
- annual filings (which means the AIF, annual financial statements and annual MD&A, and anything incorporated by reference into the AIF);
- the establishment, maintenance and design of disclosure controls and procedures (DCP) and internal control over financial reporting (ICFR);
- evaluation of effectiveness of DCP; and
- disclosure of conclusions regarding effectiveness of DCP and any changes in ICFR in the MD&A.
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Posted on March 3, 2008
Martin Langlois and Ramandeep Grewal | Version française
National Instrument 51-102 Continuous Disclosure Obligations (the Disclosure Instrument) is scheduled to be amended on March 17, 2008 as a consequence of the coming into force of the proposed national prospectus rule, National Instrument 41-101 General Prospectus Requirements. Amendments to the Disclosure Instrument include significant amendments to the requirements to file material contracts on SEDAR, as well as to the related Companion Policy guidance of the Canadian Securities Administrators (the CSA).
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Posted on February 29, 2008
Robert Carelli and
Alex Colangelo |
Version française
On November 9, 2007, Bill 19,
An Act to amend the Securities Act and other legislative provisions (Bill 19) came into force in Quebec. Bill 19 introduces a regime of secondary market civil liability, enabling investors to sue issuers and others for failing to make timely disclosure of material changes and for misrepresentations contained in public disclosure. Bill 19 closely follows the Ontario regime and readers will notice a substantial similarity between the two. Quebec also joins other provinces, such as Alberta and British Columbia, which have enacted, or are in the process of enacting, secondary market civil liability provisions.
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Posted on December 13, 2007
Stewart Sutcliffe and Ramandeep Grewal
Amendments to National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) and consequential amendments to other instruments are intended to streamline regulations regarding forward-looking information (FLI) and provide clarified expectations.
Currently, National Policy 48 (NP 48) specifies how future-oriented financial information (FOFI) is to be prepared, disclosed and updated in certain types of disclosure and offering documents. After many years of confusion with the scope and breadth of NP 48, the Canadian Securities Administrators (CSA) have decided to revoke NP 48 and replace it with new FLI and FOFI disclosure requirements. These requirements will be added to NI 51-102 and are expected to be effective as of December 31, 2007.
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Posted on December 7, 2007
New rules largely consistent with other jurisdictions
Brian G. Hansen and
Ralph A. Hipsher
In Canada, disclosure of forward-looking information (FLI) (including disclosure of future-oriented financial information (FOFI) and financial outlooks) has been governed by the somewhat outdated and imprecise National Policy 48 (NP 48). Effective December 31, 2007, the Canadian Securities Administrators (CSA) will be revoking NP 48 and replacing it with harmonized national rules in the form of amendments to National Instrument 51-102 Continuous Disclosure (NI 51-102).
These amendments to NI 51-102 will apply to all disclosure of FLI and will primarily govern disclosure of FLI by entities that are "reporting issuers" in a Canadian jurisdiction. Notably, however, disclosure of FLI contained in prospectuses, rights offering circulars and offering memoranda issued by non-reporting issuers will also be subject to these requirements. While many non-reporting issuers may not previously have been subject to NP 48, there has long been some confusion about its application and breadth. The clear and concise requirements of the proposed amendments are therefore a welcome development, particularly as they largely reflect similar disclosure requirements in other jurisdictions.
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Posted on December 1, 2007
Adrian C. Lang and Andrew Cunningham
The Supreme Court of Canada has upheld the Ontario Court of Appeal's ruling in this much-anticipated decision, released on October 12, 2007. While the Supreme Court largely followed the Court of Appeal's reasoning, the Court narrowed the application of the business judgment rule, held that there is an implied statement of reasonable belief with respect to forecasts, and narrowly interpreted "material changes" in the securities context. Surprisingly to some, the Court also awarded costs against the unsuccessful class plaintiff.
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Posted on December 1, 2007
Proposed Form 51-102F6, Statement of Executive Compensation, is touted by the CSA as improving clarity and context regarding corporate compensation practices.
Ramandeep Grewal and Alex Colangelo
On March 29, 2007, the CSA announced that they had begun to accept comments on Proposed Form 51-102F6 Statement of Executive Compensation. The changes are intended to improve the transparency of executive compensation disclosure and to provide greater insight into this aspect of corporate governance.
The requirements for compensation disclosure have not substantially changed since the current obligations were introduced in 1994. According to the CSA, the current disclosure requirements provide investors with fragmented information, which makes assessing total compensation difficult. In support of increasing the requirements of disclosure, the CSA notes that many reporting issuers already provide executive compensation disclosure beyond that which is required under the current form.
In proposing Form 51-102F6, the CSA studied the new rules recently introduced by the Securities and Exchange Commission in the United States (the SEC). The CSA’s proposed rules, however, while similar to those of the SEC, do not adopt all of the changes made in the United States, and in many cases reflect standards tailored to meet the needs of Canadian capital markets.
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Posted on June 20, 2007
The OSC's AiT proceeding could start a trend towards earlier public disclosure.
Jeffrey Singer
Recent actions by the Ontario Securities Commission (OSC) in connection with the acquisition of AiT Advanced Information Technologies by 3M Canada may lead to tighter Canadian public M&A disclosure standards. The unexpected proceedings targeted AiT and two of its directors (its President/CEO and its legal counsel) over their alleged failure to make timely disclosure of the proposed transaction. The company and one of these directors have settled with the OSC, but the second director (the company's legal counsel) has chosen to defend her actions at a hearing.
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Posted on February 28, 2007
For most Canadian public issuers, certification of disclosure controls and internal control over financial reporting is now required
Multilateral Instrument MI 52-109
Certification of Disclosure of Issuers' Annual and Interim Filings (Certification Rule) got off to a bumpy start in 2003. Being subject to a number of amendments, as well as a repeal and restatement proposal, it is not difficult to understand why there is still confusion about what is required to be certified.
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Posted on November 20, 2006
NI 51-102 amendments proposed to come into force on December 29, 2006
Simon Romano and Ramandeep K. Grewal.
On October 13, 2006, the Canadian Securities Administrators published their final notice of amendments to NI 51-102 - Continuous Disclosure Obligations (NI 51-102), its related forms and companion policy (CP 51-102), NI 51-107 - Acceptable Accounting Principles, Auditing Standards and Reporting Currency, NI 71-102 - Continuous Disclosure and Other Exemptions relating to Foreign Issuers, and consequential amendments to NI 44-101 - Short Form Prospectus Distributions and Form 44-101F1 (collectively referred to as the Amendments). This latest overhaul of the Canadian continuous disclosure regime is targeted at clarifying and streamlining various existing provisions of the respective instruments, as well as codifying discretionary exemptions that the CSA have granted in the past.
NI 51-102 sets out the obligations of reporting issuers, other than investment funds, relating to financial statements, AIFs, MD&A, business acquisitions, material change reporting, information circulars, proxies and proxy solicitation and other disclosure matters. This update focuses on some of the key changes to be introduced specifically under the Amendments to NI 51-102, its related forms and CP 51-102.
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Posted on September 27, 2006
Simon Romano and
Ramandeep K. Grewal
CSA Staff Notice 52-306 (Revised) -
Non-GAAP Financial Measures was issued in August of 2006. Its purpose is to provide greater guidance regarding the CSA's views on disclosure of non-GAAP financial measures, including forward-looking non-GAAP financial measures. Staff Notice 52-306 revises the guidance provided in an earlier notice published in November 2003 and, as a result of the broader guidance contained in it, results in the withdrawal of CSA Staff Notice 52-303
- Non-GAAP Earnings Measures.
Since publishing the original Staff Notice 52-306, the CSA have concluded that distributable cash (a measure used by many income trusts) is, in all circumstances, a cash flow measure and is fairly presented only when reconciled to GAAP cash flows from operating activities. As a result, the original Staff Notice has been re-published to communicate the CSA's expectations on how such reconciliations should be made.
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Posted on June 19, 2006
Proposed OSC Policy 51-604 provides guidance on how the OSC interprets the defence to misrepresentations in forward-looking information under the newly enacted civil liability provisions of the Securities Act (Ontario).
Amendments to the Securities Act (Ontario) (the "Securities Act") that came into force December 31, 2005 (the "Bill 198 Amendments") now allow secondary market purchasers to assert a new statutory cause of action for misrepresentations contained in public documents and public oral statements. Along with these newly created causes of action, the Bill 198 Amendments also make available certain statutory defences, including a defence for misrepresentations contained in forward-looking information (the "forward-looking information defence") included in either a document or a public oral statement.
The purpose of proposed OSC Policy 51-604 Defence for Misrepresentations in Forward-Looking Information (the "Draft Policy") is to express the views of the Ontario Securities Commission (the "OSC") on the policy considerations underlying the forward-looking information defence and to explain how the OSC interprets certain aspects of this defence. It includes guidance on satisfying the requirement to present cautionary language "proximate" to the forward-looking information which it qualifies and on application of the materiality thresholds that qualify the risk factors and assumptions that are to be disclosed. While issuers may have hoped for more detailed direction on how the technical elements of the defence are to be applied, the Draft Policy does provide valuable insight into the underlying objectives of the defence and is welcome guidance for all those dealing with disclosure compliance under Ontario's new secondary market liability regime. The Draft Policy is open for comments until August 2, 2006.
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Posted on March 19, 2006
Over the past few years, Canadian reporting issuers have been required to comply with gradually increasing disclosure requirements, changing their policies and practices along the way. As a result of securities law requirements enacted or amended in the summer of 2005, filings required to be made for the year ended December 31, 2005 are also subject to new disclosure requirements. These include: additional certifications in CEO and CFO certificates, along with corresponding disclosure in annual MD&A, as well as new disclosure relating to corporate governance practices in management information circulars and annual information forms.
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Posted on September 18, 2005
On Friday, August 26, the Canadian Securities Administrators (CSA) issued Staff Notice 41-304 - Income trusts: prospectus disclosure of distributable cash. The Notice is intended to provide additional guidance on the CSA's expectations about the nature and extent of estimated distributable cash disclosure in prospectuses.
Most income trust issuers present information about estimated distributable cash (or distributable income) in their prospectuses, as this often forms the basis upon which an income trust is valued in connection with its initial public offering. These estimates are usually based on trailing 12-month net income, adjusted for interest expenses, taxes, depreciation and amortization (EBITDA). EBITDA is usually further adjusted for certain additional items, ranging from non-recurring historical items to normalizing the effect of a recent or prospective acquisition, in order to arrive at distributable cash. The specific adjustments, as well as the level of explanatory disclosure provided in prospectuses concerning these various adjustments, generally vary from issuer to issuer.
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Posted on February 17, 2005
On January 14, 2005, CSA Staff Notice 51-314 - Retirement Benefits Disclosure (the Notice
1 was issued to provide guidance to those issuers who choose to provide enhanced disclosure of retirement benefits payable to executives that goes beyond the strict securities law requirements specified in Form 51-102F6
Statement of Executive Compensation of National Instrument 51-102
Continuous Disclosure Obligations (the Form). The release of the Notice follows increased recent public attention to the pension portion of corporate executives' remuneration packages.
Additional disclosure considered by some issuers might include information about the value of certain retirement benefit plans, for example, supplementary executive retirement plans (SERPs). According to the Form, an issuer is required to provide general information regarding estimated annual benefits payable under defined benefit plans. An issuer must also disclose certain other information, including the relationship between the amount of compensation covered under the plan and the compensation reported elsewhere in the proxy circular, as well as the estimated credited years of service for each named executive officer.
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Posted on January 17, 2005
Back in 2000, the Canadian Securities Administrators (CSA) published a concept proposal for an integrated disclosure system (IDS) to streamline the prospectus offering system. The proposal was premised in part on enhanced continuous disclosure requirements, which are now in force via
NI 51-102 (and, soon,
NI 81-106 for investment funds). Accordingly, the CSA are now proposing amendments to the short-form, shelf, and post-receipt pricing rules, among others, to simplify and broaden the short-form prospectus system. Comments are due by April 8, 2005, and implementation is being targeted for July 2005.
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Posted on August 17, 2004
Confirms New Disclosure Obligations for Disclosure of Material Errors
On July 7, 2005, the Ontario Securities Commission (OSC), rather than instituting legal proceedings, applied OSC Staff Notice 15-702 -
Credit for Cooperation, and issued a warning letter to CP Ships Ltd. regarding certain events involving what OSC staff considered to be non-disclosure of a material change and insider trading.
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Posted on January 1, 2004
The Canadian Securities Administrators (CSA) have published the final version of Multilateral Instrument 55-103 - Insider Reporting For Certain Derivative Transactions (Equity Monetization)
[1]. The Multilateral Instrument was previously released for comment on February 28, 2003 and was a subject of our prior updates. The Multilateral Instrument is expected to come into force on February 28, 2004, subject to ministerial approvals. British Columbia is expected to adopt similar requirements in a different manner.
The Multilateral Instrument is stated to be intended to address concerns that current insider reporting requirements[2] may not cover certain derivative-based transactions[3], including equity monetization transactions. Derivative-based transactions, including monetization transactions, can enable an investor to transfer part or all of the economic risk associated with the ownership of securities of an issuer, without transferring legal and beneficial ownership of such securities. Investors enter into monetization transactions for a variety of reasons, including tax planning strategies, to improve liquidity and to achieve portfolio diversification.
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